| Bush
proposes tax cuts
Early in January, President Bush unveiled his
economic stimulus plan which included several tax cut
proposals.
At the center of the President's plan is a proposal to make
stock dividends tax-free to shareholders. Such a move would
end the double taxation that results now when a corporation pays
tax on its earnings, and then shareholders are taxed again when
earnings are distributed to them as dividends.
Other key proposals in President Bush's plan include
-
 Speeding
up tax rate cuts scheduled to take place in 2004 and 2006.
Expanding the 10% tax bracket now instead of delaying it until
2008 as scheduled.
Accelerating the marriage penalty relief which was scheduled
to begin in 2005.
Increasing the child tax credit to the full $1,000 now rather
than gradually increasing it to that amount by 2010.
Temporarily increasing the alternative minimum tax exemption.
Increasing the expensing limit for business equipment
purchases.
As you make business and
financial decisions this year, consider the impact proposed tax
changes could have. And remember, proposals are just
that. The final law could differ significantly from these
original proposals.
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The IRS has issued new rules clarifying the circumstances under
which taxpayers can sell a home and not be taxed on the
profit. You are probably familiar with the tax law that lets
you sell your home and exclude from taxation up to $250,000 of
profit if you are single and $500,000 if you are married and
file a joint return. To be eligible for this break you must
have owned and occupied the home for at least two of the five
years prior to its sale. 
Definition of principal residence. The new rules
define "principal residence" for those taxpayers with
more than one home. The home that will qualify as your
principal residence eligible for the gain exclusion is the home
where you spend the majority of your time during the year.
Other factors considered relevant in determining which home is
your principal residence include your place of employment; where
family members live; the address you give on tax returns, your
driver's license, and your voter registration; your mailing
address; and the location of your bank, church, and club
memberships.
Sale of vacant land. The new rules state that the
exclusion of gain can be applied to the sale of vacant land
adjacent to your home which you used as part of your principal
residence. The home must be sold within two years before or
after the land sale.
Part business, part personal. The rules also change
how a home sale is treated when a taxpayer has claimed deductions
for a home office. Prior to the newly issued rules, the sale
had to be divided into a business portion and a personal
portion. Gain from
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the
business portion did not qualify for the exclusion.
Now if you sell a home used partly for business, you will pay tax
on gain to the extent of depreciation claimed after May 6, 1997,
but you can exclude any additional gain up to the maximum
exclusion allowed. If your home office is in a separate
building from your home, it will not qualify for the exclusion.
Partial exclusions clarified. Under the tax law, you
may qualify for a partial exclusion of gain if "unforeseen
circumstances" force you to sell your home before meeting the
two-year requirement. The new rules define these unforeseen
circumstances.
Among the event that may qualify your sale for partial gain
exclusions are the following:
-- Your home is
damaged by a disaster, act of war, or terrorism.
-- You are transferred
or lose your job.
-- You or a family
member must move for health reasons.
-- You get a legal
separation or divorce.
-- You can't afford
the mortgage payment due to a change in employment status.
-- You have to sell
because of multiple births from the same pregnancy.
For details or more
information about how these changes could apply to your home sale,
give us a call.
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Stay ahead with cost
control |
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Cost control can make the difference between business
survival and failure, between staying ahead of your
competition or getting run over. Here are a few
suggestions for keeping costs in line.
Staying in touch with your finances. Financial
statements can serve as an early warning signal to
problems or opportunities that need your attention.
Calculate profit and loss at least monthly so you know
where you stand financially.
Control overhead. Do you really need to own
your vehicles or offices, or could you lease for
less? How much computer power do you really
need? Are you paying for a luxury car when a less
expensive one would serve just as well?
Be careful when borrowing. Shop around and
compare loan rates. With a little planning, you can
often take advantage of bank rates, which tend to be lower
than either credit cards or lines of credit.
Get into a buying alliance. To compete with
large merchandisers on price, you need to buy at lower
prices. Considering joining with a few
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other
businesses so that you can buy in large quantity.
Keep track of your inventory. Identify suppliers
that can ship quickly to reduce the amount of inventory
you carry.
Establish internal controls. The lack of internal
control is the number one cause of fraud against
businesses. Establishing simple internal controls,
such as cross-training employees and limiting the duties
assigned to any one employee, can do wonders to reduce the
chance of losses from employee fraud.
Fight the urge to make across-the-board cuts. It's
tempting to cut everything by ten percent, but don't Study
your costs and be selective. You may be cutting
muscle (costs that directly contribute to revenue) instead
of fat. Attack causes, not symptoms.
Let employees help. Solicit their input. Let
employees know your financial objectives and costs, and
reward those who help make the company more efficient.
If you'd like help
analyzing costs and finding ways to control them, call
us.
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Facts and figures...
A study reported in the Annals of Internal Medicine
indicated that more than 120 million people in the U.S. are either
overweight or obese.
Being as little as 10 to 30 pounds overweight can shorten your
life by about three years.
Total consumer debt is over $5 trillion - about the same as the
government's national debt.
70% of credit card holders carry a balance; the overage is over
$3,000.
The two top New Year's resolutions this year were reducing debt
and losing weight.
In 1955, 62% of the federal budget went to military spending, and
21% went to individuals (social security, food stamps, Medicare,
etc.) In 2001, military spending represented 17% of the budget;
individual payments 61%.
| All
material presented in this newsletter is for
general information only and should not be acted
upon without further details and/or professional
assistance. |
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